B3-4.3-01, Stocks, Stock Options, Bonds, and Mutual Funds (06/30/2015)

Introduction

This topic contains information on stocks, stock options, bonds, and mutual funds.

Stocks, Stock Options, Bonds, and Mutual Funds

Stocks, Stock Options, Bonds, and Mutual Funds

Vested assets in the form of stocks, government bonds, and mutual funds are acceptable sources of funds for the down payment, closing costs, and reserves provided their value can be verified. The lender must verify the borrower’s ownership of the account or asset. The value of the asset and any related documentation must meet the requirements outlined in the table below.

Asset Type	Determining the Value of the Asset
Stocks and mutual funds	The lender must determine the value of the asset (net of any margin accounts) by obtaining either the most recent monthly or quarterly statement from the depository or investment firm; or a copy of the stock certificate, accompanied by a newspaper stock list that is dated as of or near the date of the loan application.
Stock options	The value of vested stock options can be documented by a statement that lists the number of options and the option price, and using the current stock price to determine the gain that would be realized from exercise of an option and the sale of the optioned stock. Note: Non-vested stock options are not an acceptable source of funds for the down payment, closing costs, or reserves and should not be entered on the loan application.
Government bonds	The value of government bonds must be based on their purchase price unless the redemption value can be documented.

Asset Type

Determining the Value of the Asset

Stocks and mutual funds

The lender must determine the value of the asset (net of any margin accounts) by obtaining either

the most recent monthly or quarterly statement from the depository or investment firm; or
a copy of the stock certificate, accompanied by a newspaper stock list that is dated as of or near the date of the loan application.

Stock options

The value of vested stock options can be documented by

a statement that lists the number of options and the option price, and
using the current stock price to determine the gain that would be realized from exercise of an option and the sale of the optioned stock.

Note: Non-vested stock options are not an acceptable source of funds for the down payment, closing costs, or reserves and should not be entered on the loan application.

Government bonds

The value of government bonds must be based on their purchase price unless the redemption value can be documented.

When used for the down payment or closing costs, if the value of the asset (as determined above) is at least 20% more than the amount of funds needed for the down payment and closing costs, no documentation of the borrower’s actual receipt of funds realized from the sale or liquidation is required. Otherwise, evidence of the borrower’s actual receipt of funds realized from the sale or liquidation must be documented.

When used for reserves, 100% of the value of the assets (as determined above) may be considered, and liquidation is not required.

Refer to B3-4.3-03, Retirement Accounts B3-4.3-03, Retirement Accounts, for the requirements pertaining to the use of retirement accounts for the down payment, closing costs, or reserves.

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